Analysis & Opinion

VIENNA (Reuters) - OPEC left oil output limits on hold on Thursday, powerless to do anything other than hope top producer Saudi Arabia scales back supplies unilaterally soon to stem a $30 slide in prices.

Several in the Organization of the Petroleum Exporting Countries called on Saudi to cut back to bring collective supply down to the 30 million barrel a day limit to defend $100-a-barrel crude.

Extra Saudi oil is largely responsible for lifting actual OPEC output to 31.6 million bpd, well in advance of the group's formal target, first set in December.

"There is at the moment an unjustified rise in the organization's production," said Algerian Oil Minister Youcef Yousfi said.

Price moderate Riyadh though is keen to prevent high fuel costs hampering a return to stronger economic growth in the West.

OPEC's communique said members had agreed to adhere to the 30 million bpd target, but without individual country quotas, ditched last year, that cannot be policed.

Oil prices have dropped from a $128 peak for Brent crude in March to $97, in part because the economic outlook has darkened but also because of increased Saudi output that in April set a 30-year high of 10.1 million barrels a day.

"There is a risk that prices will fall, uncontrolled, to levels from which it will be very difficult subsequently to bring them back," said Yousfi.

Iran, often at odds with Saudi Arabia at OPEC, is displeased that higher Saudi output has pushed oil prices down just as its exports drop because of Western sanctions against its nuclear program.

"We object to the drop in prices," said Iranian Oil Minister Rostam Qasemi.

"We are not happy with oil below $100," agreed Faleh al-Amri, Iraq's governor to OPEC, underlining an emerging consensus between Tehran and Baghdad on OPEC policy.

INVENTORIES BUILDING

Higher Saudi output has lifted world oil inventories rapidly, a deliberate move by Riyadh to counter the possibility that Iranian exports fall heavily when a European Union embargo on Tehran starts next month. Iran's production is already down to a 20-year low as buyers seek alternatives.

Analysts say risks are growing that prices could fall further if Saudi doesn't cut back.

"Looking at the third quarter, you'll see a modest stockbuild and with the macro situation weakening it's hard to be constructive about oil prices," said Gary Ross, CEO of U.S. consultancy PIRA Energy. "And the Saudis won't be in any rush to cut back."

Naimi has called the extra Saudi volumes and consequent oil price decline "a kind of stimulus" for the world economy. His advisors say Riyadh is in a balancing act to raise stocks to cover for Iranian losses while taking into account the prospect that the fragile world economy will slow oil demand.

"There is a surplus in the market. Most of the surplus has gone into storage, both fixed and floating, so the market in a way hasn't felt that yet," said former Algerian Oil Minister Chakib Khelil, now a consultant.

"This idea of trying to anticipate the shortfalls from Iran could backfire. If demand weakens because of the economic situation then you have a weak global economy and oversupply in the market."

Oil prices though are anything but predictable, largely because, on top of opaque supply and demand fundamentals, markets have to take into account the politics of producer countries.

Iran is the main uncertainty for prices - the impact of sanctions on its oil sales, negotiations with world powers over its nuclear program that resume in Moscow shortly and the possibility that Israel might launch an attack on its nuclear facilities.

"History tells us that a global financial collapse could see oil prices fall to $50 a barrel and below whilst an attack on Iran take them to $150 and above," said David Hufton of London oil brokers PVM.